What is novation in the context of a real estate contract?
Correct Answer
B) The substitution of a new party or obligation for an old one, fully releasing the original party from liability.
Novation substitutes a new party or obligation for an existing one, completely releasing the original party from liability. Unlike assignment, novation requires the consent of all parties involved and fully discharges the original obligor. In Mississippi real estate, novation commonly occurs when a buyer assumes a seller's mortgage and the lender agrees to release the seller from further obligation.
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Related Topics & Key Terms
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Related Concepts
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
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